GRAND RAPIDS, Mich. (WOOD) — Unlicensed contractors can illegally hold your property hostage with a piece of paper and state law lets them get away with it.
That’s what Target 8 investigators found after a woman complained that an unlicensed contractor filed a lien on her father’s northeast Grand Rapids home when she refused to make the final payment in a dispute over the work.
WHAT ARE LIENS AND HOW DO THEY WORK?
A lien is a legal document that is designed to protect building contractors and others who provide some sort of service on your property. Lawmakers in every state have historically adopted laws providing for a lien process because of the economics of the building industry that make it difficult for tradespeople to get paid if the property owner or a general contractor reneges. Most other businesses and individuals have to go to court and file lawsuits in disputes over money. Contractors may also have to do that eventually, but filing a lien first gives them a tool to enforce payment upfront.
“I always refer to a contractor’s lien as the atomic bomb of all enforcement actions,” said Grand Rapids attorney Bruce Courtade, an expert on construction law.
“You can mess with somebody’s title to the house, prevent them from getting a new mortgage or sell the house,” he said. “It’s very powerful and it can be abused very easily.”
A legal claim could even result in forcing the sale of your home.
A lien puts your property on hold. It encourages deadbeats to pay.
But it may also take give contractor’s a legal advantage in cases in which the homeowner has a legitimate dispute over something the contractor did or didn’t do.
A lien is easy to file. A contractor fills out information about the alleged debt and the property, swears to it in front of a notary and then takes it or sends it to the county Register of Deeds office. Most are mailed in. People there put it on the public record.
From there, a homeowner has the option of paying or going to court to get the lien removed. A contractor can file a suit for payment if the lien doesn’t get the owner to pony up. If nothing happens, the lien goes away in a year — but in the meantime, it prevents you from selling or getting a new mortgage and could impact your credit rating.
DON’T HAVE TO SHOW LICENSE TO FILE LIEN
State law is clear. Only licensed contractors can use the lien law.
“You cannot file a lien, you cannot enforce a lien you have filed if you are an unlicensed contractor,” Courtade, the attorney, said.
Still, county officials across Michigan let unlicensed contractors file liens anyway. Target 8 investigators checked with officials in 14 West Michigan counties and found that none requires contractors prove they are licensed before letting them file a lien.
Ottawa County Clerk Justin Roebuck said he is concerned about the problem, but said there is nothing in Michigan law that lets counties screen lien filers.
“We have no ability to verify the legitimacy of a lien document,” he said.
If the unlicensed contractor tries to file a lawsuit to collect, they probably won’t get far. But a lien from an unlicensed contractor may still cost the homeowner money if they have to take legal action to fight it.
It is illegal for anyone to work as a contractor in Michigan without a license. If they do, they face fines and possible jail time.
But there are no specific penalties for illegally filing a lien.
HOW THE LAW COULD BE CHANGED
Roebuck, the Ottawa County clerk, thinks “there are a number of legislative changes that could help this process.”
He wants to see the law fixed to discourage unlicensed contractors from filing liens. He thinks the best protection for homeowners would be to reverse the process by forcing contractors to go to court first to get a judge to sign off on their claim. That would be a huge change that would reverse centuries of law and would likely face universal outrage from contractors.
Short of that, Roebuck said, lawmakers should require contractors to show their license before letting them file a lien.
“I think it makes perfect sense to do that,” Roebuck said.
He also thinks the law should contain a penalty for unlicensed contractors who try to file liens.